Leasing vs Owning a Commercial Property

If your business is evaluating whether the benefits of owning your own property could outweigh leasing space, we have outlined several factors to consider below.

Benefits of Ownership

Equity/Appreciation: The value in owning the property you occupy allows for the ability to build equity over time. If you pay cash, you immediately own the property and if you take out a loan, the down payment and monthly mortgage payments build equity. The value of the property appreciates over time, while this will often vary based on timing, location, supply/demand, etc.

Tax Benefits: Numerous tax benefits include deductions on interest, depreciation expenses, repairs/maintenance to the property are among a few.

Control: As owner of the property you get to call the shots. You can decide how much space to take, how to configure it, whether to lease a portion of it out to another tenant and avoid the landlord dictating terms such as rental rate increases, term, etc.

Benefits of Leasing

Flexibility: While you often need to sign a minimum 3 year lease for commercial office space, there is more flexibility in having a lease expiration date then an open-ended amount of time that comes with ownership. A lease expiration can allow companies time to plan out their growth strategies for several years at a time without longer commitment.

“If you’re short on capital, leasing may allow you to allocate your money toward building your business and grant you greater freedom to respond to potential opportunities in the industry. Additionally, sometimes leasing provides an opportunity to establish a business on a more expensive prime property. ”

Less Risk: Signing a lease is more predictable in terms of payments, term and value. With purchasing a building, there is a large capital investment and the risk for unknown costs associated with repairs and maintenance.

Location: Leasing can allow for the opportunity to potentially afford a higher-end location, with less burden on a larger capital investment payment.